Forming a successful business partnership (and business) is tough.
In fact, 8 out of every 10 entrepreneurs who start a company fail within the first 18 months. There’s ups, downs, arguments, and everything in between.
I should know.
It all started back in high school when myself and a close friend of mine worked in the screen enclosure business. During that time, we would frequently talk about opening our own screen enclosure company someday.
Well, we went off to college and did as college students do for four years. During that time, we didn’t talk too much about that business. However, both graduation and reality came fast. When that happened, neither of us really wanted to go into the real world as working stiffs under management that we didn’t really like.
So, our idea of starting our own screen enclosure company came full circle. During this time, we’ve learned a lot about working with each other as business partners.
Here are some of the most important things that we’ve learned that you can use to help create your own successful partnership.
Establish Separate Roles
Running a business with a partner is a lot like marriage in several ways.
You’re with each other all the time, you have to work out finances together, and you have a difference of opinion about a lot of things. To avoid the problems that come with this, it’s essential that each of you establish separate roles in the company.
We didn’t really do this in the beginning of our company, and it created a lot of chaos. Projects weren’t running smoothly, our employees were confused about who to talk to when they had a question, and it just wasn’t very efficient.
So, we eventually realized that we needed to keep ourselves separate and out of each other’s way.
How we work it out is that my partner takes care of operations, and I take care of sales/marketing. That way, we can each become an expert in our respective roles. When someone has a problem related to a project or operations, they know to go to him. When they have a question about sales or marketing, they know to come to me.
That way, we never undermine each other, and the leadership in the building is clear.
Be Open About Money
There’s no quicker way to kill a partnership than to have money issues.
From the start, it’s vital that you’re transparent with each other on exactly how the money is going to work. This means talking about who is going to manage the accounts, how profits are going to be split, and where your money is going to be invested.
To do this, there should be an explicit agreement in place from the beginning.
In this agreement, you should outline compensation, exit clauses, and roles and responsibilities. Having an arrangement like this in place should help to prevent future arguments and disputes.
Here’s one detail that’s often overlooked; how much operating cash will your business need to keep on hand? In other words, when it comes time for an owner draw, how much will you be able to take?
Be Open, Honest, and Direct with Critique
The simple reality of a business partnership is that you’re not going to agree with everything that your partner does. Maybe you don’t like the way that they deal with employee discipline, maybe you think that they’re showing up late too often, or maybe you just think that there’s something they could be doing a little bit more efficient.
No matter what it is, it’s going to nag at you until you just can’t ignore it any longer.
In a poor partnership, people resort to things like passive aggressiveness notes or talking behind their partner’s back. In a strong business partnership, both partners feel that they can communicate openly with the other about what’s going on.
If they have a critique of your performance, they feel that they can tell it to you to your face.
When you don’t handle it like this, or it spirals into a big argument, your employees see that. When they see that, it gives them an impression that the leadership is weak. The flip side of this is that you need to be able to handle criticism like a professional. If your partner has something to say, it’s important to actually listen instead of going on defense immediately.
Have a System for Decisions
One of the toughest parts about running a business is all of the decisions that you have to make. You have to run marketing campaigns, create company policies, make investments, resolve employee disputes, and a range of other things that pop up on a regular basis.
Although some of this can be solved by having separate roles (i.e. one person makes all the marketing decisions, the other makes all operations decisions), there are always things that come up that don’t necessarily fall into one of those categories.
That’s why you need to have a system in place for making decisions.
For some companies, even those that are basically a 50-50 split, there is essentially one decision-maker for those types of decisions. While one person may be great at what they do, they might have a tough time making choices. Knowing who that person is can help you save a lot of time and frustration when those tough choices come up. The flip side of that is that both partners feel that they’re the one who should be making the final call. If you two can’t work that, you’ll need to come up with a system to help you make those tough choices.
Whether it’s putting the decision up to a vote or just flipping a coin, you need to have a way to get the decision made without an argument.
Running a business is difficult, and doing it with a partner adds a whole new element. While having that extra person is great for several reasons, you’ll also run into problems from time to time.
However, many of those problems can be avoided with clear communication and realistic expectations from the beginning.
If you’ve ever started a business with a partner, or are thinking about doing it, let me know your thoughts in the comments section below!